Preferential Trade Agreement Mexico: What It Is, Importance, and Benefits

A Preferential Trade Agreement (PTA) is a trade agreement between two or more countries that reduces or eliminates tariffs and other barriers to trade on certain goods and services. Mexico has entered into several PTAs with other countries, including the United States, Canada, and the European Union. In this article, we will go over the importance and benefits of Mexico`s PTAs, specifically the one with the United States.

What Is the Preferential Trade Agreement between Mexico and the United States?

The Preferential Trade Agreement between Mexico and the United States is commonly known as NAFTA (North American Free Trade Agreement). NAFTA was signed in 1994 and created a trilateral trade bloc between Mexico, the United States, and Canada. NAFTA eliminated most tariffs on goods traded between the three countries, removed barriers to investment, and established new rules and regulations to promote trade.

Since its inception, NAFTA has helped to increase trade between Mexico and the United States by more than threefold, from roughly $290 billion in 1993 to over $1 trillion in 2019. NAFTA has also stimulated economic growth and job creation in both countries. For example, the agreement has resulted in the creation of millions of jobs in the United States, especially in the manufacturing sector.

Why Is the Preferential Trade Agreement between Mexico and the United States Important?

The Preferential Trade Agreement between Mexico and the United States is important for several reasons. For one, it helps to foster economic growth and job creation in both countries. Increased trade between the two countries leads to more investment, which is a key driver of economic development.

In addition, the PTA helps to promote stability and cooperation between the United States and Mexico. The two countries share a long and complex history, and the PTA is a testament to their commitment to working together and building stronger ties.

Finally, the PTA is important because it helps to promote free trade and reduce barriers to trade. This is important because trade barriers can lead to higher prices for consumers, reduced competitiveness for businesses, and reduced economic growth overall.

What Are the Benefits of the Preferential Trade Agreement between Mexico and the United States?

The Preferential Trade Agreement between Mexico and the United States has numerous benefits. Here are some key benefits:

1. Increased trade: NAFTA has led to increased trade between Mexico and the United States, which has fostered economic growth and created jobs.

2. Lower prices: Lower tariffs on goods traded between the two countries means lower prices for consumers.

3. Improved competitiveness: Businesses that can trade goods and services more freely are more competitive in the global marketplace.

4. Increased investment: NAFTA has encouraged investment in Mexico and the United States by reducing barriers to investment.

5. Enhanced cooperation: The PTA has helped to build stronger ties between Mexico and the United States, which is important for maintaining regional peace and stability.

In conclusion, the Preferential Trade Agreement between Mexico and the United States is an important agreement that has led to increased trade, economic growth, and job creation in both countries. The PTA helps to promote free trade, reduce trade barriers, and enhance cooperation between the two countries. As such, it is an essential pillar of the bilateral relationship between Mexico and the United States.